2020 Market Review; Mixed Week

For the Week Ending Dec 25, 2020...

Anecdote of the Week: Tesla was added to the S&P 500 on Monday. The car maker has a market value ($650 billion) greater than Ford, GM, and Chrysler COMBINED - yet delivers 20% of the cars they do.... {head shake}.

Weekly Update... One Minute

Investors Wait for Stimulus: Stocks were mixed on typical holiday low volume as investors weighed lawmakers' approval of a second large relief package.

Trump's Checks? If President Trump does in fact get his way on $2,000 checks expect the market to positively react. As of Sunday the GOP was against the larger checks, the Dems for them.

Rotation to Small Caps: Small cap and technology stocks were up, an indication that investors are less concerned about a longer term economic challenge. Typically in bad times investors flock to large cap dividend payers. Seeing the Russell 2000 (small cap index) on a continued run is a sign of investor confidence.

Economy Looking Good for Recovery: Consumer confidence, however, had a short-term drop, and weekly jobless claims rose, pointing to continued strain from economic restrictions. What does this contrasting data between markets surging and consumer spend suggest? It suggests that recovery is in the works, but stock market fits and starts will rule the day as Americans are immunized. Remember, investors bet a year out, while consumer data is short term.

Volatility: The S&P 500 heads into 2020’s final week with about a 15% YTD gain, but from the March low it's up 65%. That’s volatility that hasn't happened in modern times.

And that’s your one minute weekly market scoop.

Looking Back on 2020

Look out for our 2021 stock market forecast next week.... In the final week of a tumultuous year, thanks to therapeutics and science, the economy is on track for a remarkable recovery. Market indexes are trading near record highs, reflecting a positive 2021 outlook, an outcome that was hard to envision four months ago.

Bull to Bear to Bull Again: The unique, sudden COVID shock started on February 20th and accelerated into the fastest bear market in history, with the S&P 500 declining 34% in just 23 days. For perspective, historical 35% declines took an average of 11 months to recover. On the flipside, new highs in August marked the fastest recovery from a bear market on record. Unprecedented in our history.

Negative Oil Prices: Oil prices briefly fell into negative territory (-$37 / barrel) in April for the first time in history. This means that producers had to pay for buyers to take their oil. They literally couldn’t give it away. Airlines and consumers stopped buying and futures contracts sold off sharply. Unprecedented in our history.

GDP Yo Yo: The U.S. economy experienced the worst quarterly contraction on record in the second quarter (-31% annualized), four times larger than the worst quarter during the '07-'09 financial crisis. The reopening of the economy resulted in the largest ever rise in 3rd quarter output (33% annualized). Unprecedented in our history. These wild swings in GDP are a reminder that the U.S. is a consumer-driven economy. Just watch consumer spending to know where the economy is headed.

Unemployment Swings: Unemployment went from a 50-year low (3.5%) in February to the highest level (24.5%) since the Great Depression, surpassing the previous high in 1921. Since then, more than half the losses have been made back and it’s on a positive trend - with short term dips. Unprecedented in our history.

Fed Prints Money: The rebound was mostly due to monetary and fiscal policy credited to the fed. Regardless of what you think about deficits and federal money printing, most experts agree this jolt to the system staved off a potentially massive depression. For context, the Fed grew its balance sheet by over $3 trillion over the course of four months, the same amount the fed added in over four years during the ‘07-’09 financial crisis criss. Unprecedented in our history.

V or K-shaped recovery? The economy rebounded sharply from its spring bottom. The jolt of a sudden recession then pent-up demand produced a V-shaped recovery. However, two-thirds of the job losses at the height of the recession were in vulnerable industries that rely on social contact. Also, small businesses, which employ roughly half of the U.S. labor force, continue to struggle. While certain industries and sectors, like technology, benefited from the pandemic, others, like airlines, hotels and restaurants, were disproportionately impacted - and the struggle continues.

 scoop markets, written by professional economists and investors with backgrounds from leading Wall Street firms, breaks down the complexities of the stock market and economy into easy access, digestible morsels. You're busy, but you care about your investments - and it's exhausting keeping up with the stock market.  We solve that problem.  

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